US manufacturing activity contracted in August for a sixth month
[WASHINGTON] US factory activity shrank in August for a sixth straight month, driven by a pullback in production that shows manufacturing remains bogged down by higher import duties.
The Institute for Supply Management’s (ISM) manufacturing index came in at 48.7 last month, according to data released on Tuesday (Sep 2). Though this was a slight improvement from 48 in July, details of the report were mixed and the gauge remained below the level of 50 that separates expansion and contraction.
The group’s index of factory output sank 3.6 points to 47.8, moving back into contraction territory for the first time in three months. The group’s measure of employment inched up, but remained at one of the weakest levels since the year of the Covid-19 pandemic. Select comments from survey participants were notably downbeat.
“We continue to have weak demand overall, still due to tariff uncertainty,” Susan Spence, chair of the ISM’s Manufacturing Business Survey Committee, said on a call with reporters.
“Sixty-nine per cent of manufacturing GDP is in contraction. It’s down slightly from July. We have 4 per cent of those industries in a heavy contraction period, and that is also down, but it is still not good to have that much in contraction.”
At the same time, there were a few hopeful signs about the outlook. Orders expanded for the first time since the start of the year. The ISM gauge of new bookings jumped 4.3 points, the largest increase since the start of last year, to 51.4.
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A measure of prices paid for raw materials declined to 63.7 – still elevated but the lowest since February. That follows a 4.9-point drop seen in last month’s report, suggesting that tariff-induced price volatilities are subsiding.
The mixed report highlights the number of cross-currents facing the nation’s producers. While still experiencing higher costs as a result of hikes in import duties, manufacturers are still benefiting from solid business investment and resilient household demand.
Consumer spending
Government data last Friday showed consumer spending rose in July at the fastest pace in four months, fuelled by outlays for big-ticket goods such as cars.
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Ten industries contracted last month, led by makers of paper products, wood, plastics and rubber, and transportation equipment. Seven industries expanded.
The ISM data also showed order backlogs shrank at a faster pace, helping explain the soft employment figure.
Meanwhile, manufacturers are wrestling with supply chain disruptions related to the Trump administration’s uneven rollout of its trade policy. The ISM supplier delivery gauge showed delivery times lengthened last month. Also, the group’s import index indicated a faster pace of contraction.
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